Speaking the Same Language ; M&a Is a Great Vehicle to Put Up a Global Outpost Virtually Overnight, but the Exercise Can Also Be a One-Way Ticket to Disaster.

Summary

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The transistor radio, the Trinitron Colour TV, the Walkman and the Watchman can all be attributed to Akio Morita, the late Chairman of Sony, and one of the leaders at the vanguard of Japan's post-war economic recovery. Unfortunately, Morita can also be held accountable for the decision to acquire Columbia Pictures in the US for $3.4 billon in 1989. Morita apparently believed that the acquisition would give Sony the software that would compel consumers to buy its hardware. He is also supposed to have said that he was "proud of the fact that this acquisition would rank as the most expensive foreign takeover of an American company." By November 1994, Sony announced a $3.2 billion write-off of its investments in Columbia, a recession in Japan, the consequent appreciation of the yen and a slowdown in the hardware business all conspiring to ensure that the targeted synergies never materialised.

If Morita could go wrong, what are the chances of India Inc, which has collectively spent $15.7 billion (Rs 706.5 crore) to buy some 147 companies worldwide-or at least some sections of it-making an acquisition that will end up an absolute disaster? Not remote for sure. After all, the pressures are varied, and to be sure it's not just about making the numbers add up. It's also about making the twain of conflicting cultures meet (the Japanese at Sony were apparently uncomfortable with the spending habits of the Americans), and it's about ensuring that employees thousands of miles away are aligned with the objectives of the management back home. Then, ask L.N. Mittal of Arcelor-Mittal fame, and he will likely tell you the challenge starts right from the nationality of the bidder. UB group's Vijay Mallya is believed to have faced similar resistance when making a play for French champagne house Taittinger.

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Speaking the Same Language ; M&a Is a Great Vehicle to Put Up a Global Outpost Virtually Overnight, but the Exercise Can Also Be a One-Way Ticket to Disaster.

A clutch of Indian acquirers, for their part, has been there, felt that. Consider for instance the experience of Tata Chemicals when it acquired the UK-based Brunner Mond in December 2005 through a negotiated process; the acquisition made Tata Chemicals the third largest soda ash manufacturer in the world (up from number 14). While there were few cultural issues in The Netherlands, the headquarters of Brunner Mond, Tata Chemicals faced resistance from employees in Kenya (Brunner also owned natural soda ash reserves at Lake Magadi in Kenya), who were not willing to work for...

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